What are empty rates?
Empty rates are the full business rates payable on vacant commercial premises after intitial grace periods of 3 months for non-industrial properties and 6 months for industrial.
Why are empty rates a problem?
Prior to April 2008, vacant commercial properties were not expected to pay full business rates, which seemed fair as empty properties do not generate any income -- the occupier is no longer economically active on the premises, or the landlord isn't receiving any rent from the tenant. Paying full business rates on vacant properties has been likened to forcing the unemployed to pay income tax.
This tax hike occurred at worst time possible, an economic collapse. The commercial property sector is particularly struggling as values continue to tumble and tenant demand dries up.
The increased cost of empty rates are making any viable development even more difficult in the current market.
And empty rates are forcing some property owners to demolish their buildings, as it costs more to keep them up and pay empty rates than to knock them down.
Why did the Government remove business rate relief for empty commercial properties?
The government argued that empty rates would put downward pressure on rent levels, thereby helping tenants, and would also prevent landlords from deliberately hoarding empty premises for extended periods of time.
Have empty rates achieved Government's objectives of lower rent and higher occupancy levels?
No. Statistical analysis of the property market shows that rents are not sensitive to empty rates as government claimed, but instead reflect demand.
Does Government have the power to reintroduce relief for empty commercial properties?
Yes. The government gave themselves the power to reintroduce partial relief in the case of 'prevailing market conditions'. But despite the economic recession and worst property market on record, the government has not yet used this power.
